Zerocoin: Anonymous Distributed E-Cash from Bitcoin
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Mike Hearn:
Yeah, I agree with Adam, an alt coin with an integrated ZeroCoin would be a very interesting thing to play with. The chain-trade algorithm can be integrated to make trading bitcoins for altcoins easy and decentralised.
jgarzik:
Quote from: jl2012 on July 05, 2013, 11:24:42 AM

Quote from: Mike Hearn on July 05, 2013, 10:26:32 AM

No, that's not true at all. The whole point of running a Bitcoin full node is that you do NOT blindly follow any rule changes miners agree on. That's fundamental. If you do blindly follow them then you're using simplified payment verification.


If the majority of miners decide to restrict block size to 100kbytes, what non-mining full node could do? They could either follow, or join a shorter fork with bigger block size (i.e. hardfork ). Non-mining nodes don't really have much choice


While true, because miners control transaction selection, there are a great many rule changes that miners cannot make, no matter how much hash power they have.



jl2012:
Quote from: jgarzik on July 05, 2013, 02:13:03 PM

Quote from: jl2012 on July 05, 2013, 11:24:42 AM

Quote from: Mike Hearn on July 05, 2013, 10:26:32 AM

No, that's not true at all. The whole point of running a Bitcoin full node is that you do NOT blindly follow any rule changes miners agree on. That's fundamental. If you do blindly follow them then you're using simplified payment verification.


If the majority of miners decide to restrict block size to 100kbytes, what non-mining full node could do? They could either follow, or join a shorter fork with bigger block size (i.e. hardfork ). Non-mining nodes don't really have much choice


While true, because miners control transaction selection, there are a great many rule changes that miners cannot make, no matter how much hash power they have.



Sure, I am talking rules tightening only. Something like increasing block size must be a hardfork
d'aniel:
Quote from: adam3us on July 05, 2013, 12:54:57 PM

Anyway other than the question of whether soft forks make sense or not: what about making an all zerocoin based alt-coin (no bitcoins, nothing but zerocoins), that is either-or mined with bitcoin.  Then people can trade in and out of zerocoins by buying or selling them for bitcoin with an atomic transaction, probably p2p without some trusted exchange like mtgox.

Either-or mined (as distinct from merge-mined) I mean that each mined coin set is either a set of 25 bitcoins or a set of 25 zerocoins.  If its a zerocoin set its not a valid bitcoin set, and if its a bitcoin its not a valid zerocoin.  I'm not sure the zerocoins or bitcoins have to do much with mining events for the other network other than check they have the expected number of bits as they wont automatically know how to validate the other network.  Some miners may choose to validate both networks, but thats a choice for them.

In that way people can experiment with zerocoin, without bloating the block chain, complicating bitcoin, and without slowing validation on the bitcoin network.  And the two coins should have approximately the same cost (and maybe therefore value, though the price would be subject to demand/supply and any taint discount for bitcoins; zerocoins are taint free, or perfectly blended taint at least).

Adam



I posted a zerocoin based alt-coin strategy as well if you're interested:

Quote from: d'aniel on July 03, 2013, 04:13:39 AM

The Zerocoin people are going to release a library in a couple days that any Bitcoin protocol-based currency can implement.  The problem with Bitcoin implementing it directly is that it's very cumbersome - transactions are large and verifying them is CPU intensive.  The result would be that Bitcoin would have a much harder time staying decentralized while it scales up.  However, alt-coins will undoubtedly implement it, and compete with Bitcoin for market share.  In anticipation of this, I'd like to describe a way that a Zerocoin alt-chain could be implemented that would reinforce Bitcoin, rather than destabilize it, as well as the incentives that the existence of Zerocoin alt-chains creates for Bitcoin miners.

Symbiotic Zerocoin alt-chain:

Zerocoin could be implemented on an alt-chain that's merge-mined on the Bitcoin blockchain, where new currency units are allowed to be created (perhaps at a limited rate) by anyone who has provably destroyed an equivalent number of bitcoins (using OP_RETURN), and mining the Zerocoin chain is incentivized by transaction fees and the value that a strong symbiotic Zerocoin chain would add to Bitcoin.  The market would determine the amount of bitcoins that move over to the Zerocoin chain; if the value of a zerocoin rises much beyond that of a bitcoin, then people would tend to turn bitcoins into zerocoins and profit off of the difference.

By functioning symbiotically, the bitcoin unit of account would be reinforced instead of destabilized - the Zerocoin chain would act like "a rising tide that lifts all boats" instead of only its own at the expense of bitcoiners'.  Zerocoin mining revenues would go toward strengthening the combined mining network.  Users wouldn't have to speculate on how many of their bitcoins they need to trade for zerocoins, and at what price, in order to retain their purchasing power.  If Zerocoin turns out to have seriously damaging bugs or scalability issues, then conservative users that keep their long-term value parked on the Bitcoin chain won't have to worry about going down with the ship.  This would also set a nice precedent that new coins can be adopted without threatening the stability of their predecessors.

Incentives faced by Bitcoin miners:

If the demand for a Zerocoin chain is large, then Bitcoin miners collectively have an equally large incentive to provide one in order to avoid losing market share, and they are in a position to provide by far the most secure one.  They could mine an alt-chain that competes with Bitcoin, but I hope they see that the correct collective strategy (https://en.wikipedia.org/wiki/Nash_equilibrium) is to mine a symbiotic one like I described above, and only that one.  By mining a competing one, a miner might earn more immediate inflation revenues (though profitability will in any case be driven down to a minimum in the long run due to stiff mining competition), but they would do so by reducing the utility of Bitcoin as a store of value, and thus cryptocurrencies in general: if the flagship one can't preserve this functionality in the face of new innovations, then people will recognize that likely none of them will be able to.  In turn they would detract from the future value of their own hardware.

To get a sense of the incentive of a miner to preserve the store of value function, consider that a single person storing $100,000 in value for a year contributes to the overall valuation of the currency during that time as much as a thousand people that casually use it for transactions and only keep on average $100 stored in it at any given time.  It thus strikes me as potentially important enough of an issue in some cases for miners to actively discourage the merged-mining of alt-chains that detract from Bitcoin's store of value functionality, by refusing to build on blocks that do this, and by merged-mining symbiotic alternatives.

marcus_of_augustus:
Quote from: adam3us on July 05, 2013, 12:54:57 PM

Anyway other than the question of whether soft forks make sense or not: what about making an all zerocoin based alt-coin (no bitcoins, nothing but zerocoins), that is either-or mined with bitcoin.  Then people can trade in and out of zerocoins by buying or selling them for bitcoin with an atomic transaction, probably p2p without some trusted exchange like mtgox.

Either-or mined (as distinct from merge-mined) I mean that each mined coin set is either a set of 25 bitcoins or a set of 25 zerocoins.  If its a zerocoin set its not a valid bitcoin set, and if its a bitcoin its not a valid zerocoin.  I'm not sure the zerocoins or bitcoins have to do much with mining events for the other network other than check they have the expected number of bits as they wont automatically know how to validate the other network.  Some miners may choose to validate both networks, but thats a choice for them.

In that way people can experiment with zerocoin, without bloating the block chain, complicating bitcoin, and without slowing validation on the bitcoin network.  And the two coins should have approximately the same cost (and maybe therefore value, though the price would be subject to demand/supply and any taint discount for bitcoins; zerocoins are taint free, or perfectly blended taint at least).

Adam



+1
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